Apple to launch cut-price version of iPhone

By Joseph Menn in San Francisco

Apple plans to introduce a cheaper version of its popular iPhone as soon as Monday, in a move that could dramatically increase the company’s share of the market for web-surfing devices, people familiar with the initiative said on Thursday.

Analysts said that the company wanted to show off either a $149 phone or a $99 phone, down from the current low end of $199 and still subsidised in exchange for an AT&T communications service contract.

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“It’s either a $50 or a $100 cut,” said Morgan Stanley analyst Kathryn Huberty.

Citing a firm survey of consumers, she said that a $50 price cut could increase demand by 50 per cent and a $100 cut by 100 per cent.

Apple sells about 11 per cent of the world’s smart phones, trailing Nokia’s 41 per cent volume and Research in Motion’s 20 per cent, according to Gartner figures from the first quarter. Palm’s Pre was expected to go on sale later on Friday.

Apple declined to comment, although the company typically introduces major products at its developer conference, which begins on Monday with a keynote speech by senior vice-president and marketing chief Phil Schiller.

The anticipated new phone is likely to start production in July with the third version of the iPhone operating system, also expected to be released next week as a free upgrade for existing iPhone owners. The new software includes the ability to cut and paste text and to search for information inside multiple applications at the same time.

An even bigger impact on market share could come with new pricing from AT&T, which remains in an exclusive deal with Apple.

Randall Stephenson, AT&T chief executive, said last week that variable pricing for internet use would arrive eventually, charging heavy data users more and occasional users less.

Collins Stewart analyst Ashok Kumar said that he expects that to happen in the third quarter. Apple is the farthest ahead in the number of applications users can install on their phones. Most developers are working to create such software either for Apple alone or for Apple and Google’s Android, an open platform being adopted by multiple handset manufacturers, Ms Huberty said.